Local Bank or Online Payment Solution: Which is Best for You?

Lara Berendt

Feb 21, 2018

If you’re interested in accepting credit and debit card payments in your firm or you’re shopping for a new payment processor to replace your existing one, there are quite a few options out there for you to choose from.

You might look to your local bank to determine whether its merchant services will work for your business, but you’ll likely also find dedicated online payments companies offering payment processing and more. You may wonder how their services stack up against the bank where you already have all your business accounts.

Differences in features and functionality

Most banking institutions offer a wide variety of services, including personal and business bank accounts, credit cards, and loans—and many offer merchant services, too. On the plus side, if payment speed is your top priority, your bank might provide next-day funding for credit and debit card transactions.

When it comes to other features and functionality, though, it’s important to note that for the majority of banks, merchant services is treated more as an add-on or supplementary offering than a primary area of business. For this reason, banks typically outsource their merchant services to third-party companies that specialize in credit card processing.

The services offered by these third-party companies usually involve an on-site terminal—a piece of equipment you’re required to use to run credit and debit transactions in your office. These point of sale (POS) stations are an ideal solution for retail and restaurant businesses, as they serve as a sort of modern, digital checkout machine. But POS terminals can be awkward for professional services firms like yours, which invoice clients via the mail or email rather than “ring up” charges at the end of a meeting.

Some of these terminals only generate paper receipts, which necessitates a manual reporting and reconciliation process for the business. For this reason, many terminal-based products don’t provide any reporting capabilities at all; others only offer the ability to view daily payment batches.

The third-party payments provider your bank works with might offer online payment processing in addition to terminal-based processing. These online services can be great solutions for retail companies that need e-commerce or online store capabilities, with a traditional online shopping experience where website visitors can add items to a shopping cart and then check out and pay. But for the most part, these providers don’t offer the ability to generate unique client bills requesting payment after professional services have been performed.

In contrast, a financial technology company that’s dedicated to providing online payment solutions is more likely to offer the features and functionality that matter to your business. The best online payment companies don’t require any special terminal or equipment at all, allowing you to process payments completely online, through a secure web-based portal. You can run payments through this portal in your office, or send a link along with your bill allowing clients to pay at their convenience. With a dedicated online payment solution, you can also get features like comprehensive reporting and reconciliation tools, recurring payments, client billing tools, and the ability to integrate online payments right on your website.

Best of all, you can get all this added billing and payments functionality while still keeping your business bank accounts at the bank of your choice. With an online payments solution, funds are typically deposited within 24 to 48 hours, and next-day funding may be available on request.

Level of customer service and support

One of the main reasons CPAs consider working with their bank for payment processing is that they have a relationship with their local banker and feel they’ll get a higher standard of service from someone they know, who they can talk to face-to-face. Keep in mind, though, that if your bank outsources merchant services to a third-party provider, your local representative probably won’t be able to help with your credit and debit processing questions. Instead, they’ll have to point you to that third-party provider for support.

For example, if a payment doesn’t batch out correctly or you have questions about a payment dispute on your account, you could contact your bank representative. But that person will either have to redirect you to the third-party payment processing company or call that company on your behalf, acting as a middle-man. This can lead to miscommunications or long hold times on the phone.

If service and support are a top priority, a company with its own proprietary technology and payment gateway might be the best choice for you. This type of payment provider has a lot more visibility into and control over any technical issues that might arise. The best online payment solutions offer real-time support from an in-house team that’s focused specifically on helping users of that specific payment solution. This means the middle-man is taken out of the equation, and you can speak directly to the skilled professionals who can solve your problems.

Software integration capabilities

One of the greatest benefits of accepting payments online is the ability to integrate payments with the software tools you already use and love. A dedicated online payments company focused on professional services firms like yours can give you more of the tools you need to integrate payments on your website and into the software tools you use to run your business. When you search for an online payments solution, be sure to look for a company that has in-house development support, as this is an indication that they continue to innovate and improve their product based on the needs of firms like yours.

Banks don’t typically have internal development resources to build out software integrations, especially not integrations catered to the accounting industry. Additionally, the tools the third-party processor has chosen to integrate with might be catered to the needs of retail, restaurant, or e-commerce businesses, as these are the businesses they design their merchant services for.

If your bank’s third-party merchant services provider does have software integrations in place, your bank is unlikely to be able to support or answer questions about these integrations. You might again find yourself in the position of working through your bank as a middle-man or having to navigate the organizational structure of the third-party company to find out what programs and tools you can use with your payment processing service.

Differences in processing costs

We’ve talked about how most local banks outsource merchant services to a third-party payment processor, and how this affects the level of support and integration capabilities you receive. It also affects the overall processing rates you pay for these services. This is because your bank has to pay its back-end processor for these services, as well as try to make money on the services itself.

This means you could end up paying more through your bank than you would working directly with a standalone company that has proprietary payment technology. Your bank—and you, by default—may also have little to no recourse or bargaining leverage if the third-party provider chooses to raise their rates. The best dedicated online payments companies will have straightforward fee structures and no hidden fees. If affordable rates and transparent pricing are top concerns, this is another instance where cutting out the middle-man can benefit your firm.

When to choose your bank

There are some CPA firms for which payment processing through a local bank will be the best choice. For instance, if you have a longstanding personal relationship with your local banker and your top priority in choosing a payment solution is preserving that relationship and having the option of regular face-to-face interactions to discuss your merchant services, your local bank might be the right choice for you.

If you’re retiring soon or you’re not actively trying to grow your business and instead want to simply maintain your current clientele, a bank’s merchant services may be sufficient. Additionally, if you never receive requests from clients to pay by credit, debit, or ACH, or if you receive so few requests that it’s not an inconvenience to process through a terminal or reconcile your accounting based on paper receipts, your bank might be able to meet your needs.

Keep in mind, though, that if you do want to grow your business, serve a younger clientele, or have modern billing, payments, and reporting capabilities, working with a dedicated online payments company can give you the features, flexibility, level of support, and cost-efficiency you’re looking for.